Purchasing a Brand New Condo
2020 The Bahl and Yew Team #1in Real Estate Downtown Toronto
CONTENTS
01
Who We Are
02-03
Purchasing a Pre-Construction Condominium
04
Taxes, Warranties and Property Values
05
Occupancy
06
Registration of Your Unit
07-08
HST on the PurchasingPrice
08
Pre-Construction Renders
WHO WE ARE We’re a team of RE/MAX agents who ranked No. 1 for condo sales in downtown Toronto. We achieved this position by following a philosophy of great service at every level of a transaction. That’s why in addition to a fulltime sales staff, our team includes property managers, real estate lawyers and mortgage brokers. Ensuring our clients have everything they need, every step of the way.
All of our clients receive the same pledge from us. We will always: Respond to your emails within one hour
Return your calls with 20 minutes
Treat your investment as if it were our investment
We combine our emphasis on outstanding service with expansive expertise,thorough market knowledge and more than 50 years’ experience buying, selling and managing properties in the GTA.Because we don’t think you should be made to choose between the most knowledgeable agents or the most dedicated agents in Toronto when you can have both.
These pillars of service have allowed us to sell more condos than the other 48,000agents in Toronto, and what makes us your best choice for buying, selling and renting out your place. Purchasing a home will be among the largest financial transactions you will ever make, and it’s sensible to do your homework before committing to a real estate agent. That’s why we encourage you to contact us, and ask us anything you want. Because while our accolades and experience speak for themselves, we never get tired of proving ourselves to new clients by maintaining the same unmatched standards that got us to the top of the hottest real estate market in Toronto
Contact Us: Provide you with the highest level of service possible
Use our knowledge and experience to get you the best deal
RE/MAX Real Estate Solutions, Brokerage 14 Harbour St. Toronto, ON, M5J 2Y4 www.realestatecondos.ca Office: 647-259-8806 Direct: 416-837-7575 info@realestatesolution.ca
Purchasing a Brand New Condo 2018 Edition
01
PURCHASING A PRE-CONSTRUCTION CONDO A pre-construction condo is a 5 The closing costs of a pre-construction sale are usually higher than a resale building or unit that is for sale, but transaction, and it’s important to understand has not yet been completed. There this before signing your agreement. The reason are numerous advantages to buying per-construction closing costs tend to be higher pre-construction, but doing so is because of the costs associated with new requires delayed gratification. For developments, including: the most part, the process is similar • Utility costs to that of a resale purchase, though there are some marked differences. • Land development fees / Park Levies These are the key factors we advise • Education levies you to be aware of. • Tarion warranty 1 HST is usually included in the sales price
of a pre-construction condo, but we always advise you confirm this before signing any documents.
2 After signing a purchase contract and
presenting a cheque, your transaction will be subject to a 10-day cooling off period. During this time, you should reassessyour financial status and commitment to making the purchase. If you change your mind, you are permitted to void the agreement without penalty.
3 Pre-construction purchases require a
staggered down payment that’s collected over the course of approximately a year and a half. Post-dated cheques can be given to the builder at the time of sale or at the end of the cooling period. Proof of mortgage preapproval must also be provided at this time.
4 When you sign purchase agreement, make
sure you receive a copy of the agreement and the condo disclosure, which details the budget for the first year and the common expenses allocation. We advise you have a lawyer review these documents to explain the costs and clauses outlined by the agreement.
•
Lawyer fees
•
Status Certificate
•
Hydro meter installation
•
HST on chattels, etc.
•
Mortgage discharge (Builders)
In some cases, builders will cap these variable amounts. We advise you attempt to negotiate to have costs capped, as doing so may save you money, and will definitely give you peace of mind.
6 Developers determine the occupancy
date – the day you can can either move in or rent out your unit. The unit is usually complete by this time, but common areas,like hallways and shared amenities may not be. It is common for work to continue in these areas for an additional 9-12months.
7 Every purchase agreement will have either
a confirmed or tentative occupancy date. In cases of a tentative date, the builder must inform the purchaser of the occupancy date no later than 30 days after roof assembly is complete (or another predetermined construction phase). If the purchaser is not
The Bahl and Yew Team. #1 Real Estate Team in Downtown Toronto 010 2Purchasing a Brand New Condo
given notice of the confirmed occupancy date at least 90 days before the tentative occupancy date, then the tentative date automatically becomes the confirmed date. Be aware of whether the date you’re given is tentative or confirmed so you understand your rights in the event of a delay. Also be aware that builders will not compensate purchasers for delays caused by events beyond their control, such as weather events or a labour strike. When the unit is ready to be occupied, a pre-delivery inspection (PDI) will be arranged. A representative of the builder will walk you through the unit to identify any deficiencies that should be addressed prior to you moving in. If these deficiencies are not fixed prior to your move, you will be provided with a form to share with the developer and with Tarion.
8
During the occupancy phase, condo owners are required to pay occupancy fees. These fees are comprised of interest only payments on the outstanding amount due (original purchase price – down payment), usually at the posted BoC rate + condo fees + estimated property taxes. This period usually lasts approximately 6-12 months.
9
Once the building is completed and registered, your mortgage payments will replace to the interest only condo fees. You will also receive the title to the unit and pay all outstanding closing costs. Condo fees are usually inexpensive the first year, but will increase thereafter. This is because the condo board will have to begin maintaining new features, and the cost of utilities will increase for a fully occupied building. If you are considering a pre-construction condo, or are already midway through the purchasing process, contact us with your questions. We’re happy to help explain the fees, requirements and timelines involved. Purchasing a Brand New Condo 2018 0 3 01 Purchasing a Brand New Condo
TAXES, WARRANTIES AND PROPERTY VALUES Paying taxes and providing warranties for unbuilt properties is a unique exercise not applicable to resale transactions. Here, we outline some of the key elements you should be aware of. We also examine how the value of a unit is determined before it even exists, and provide tips on how to save. Property taxes You are required to pay property taxes for pre-construction purchases. However, because the total cost of your transaction is as yet undetermined, the taxes you pay are estimates, and will eventually be adjusted when the municipality provides a final assessment. In many cases, this assessment will yield a refund.
Tarion Warranty Corporation
and ensure you’re getting precisely what you want. Value 2: Get in early Once a condominium is 70%-75% sold out, builders usually increase the price of the remaining units by 5%-10%.Getting your unit early is the best way to avoid paying a higher fee. Value 3: Occupancy (not registered) sales
Applicable to investors looking to flip a Tarion is the name to know when buying unit, the sale can only be considered an pre-con. This organization administers the “assignment,” as most builders restrict the sale Ontario New Home Warranties Plan Act, of units during this time. Some developers which outlines the protection requirements outright forbid this type of sale,but if not, that condo builders must provide, by law, to you can resell a unit without paying the buyers. The overarching protection offered by closing costs. Tarion includes financial redress in the event Value 4: Registered sales a building is cancelled, severely delayed or completed without meeting key specifications. Once the building has been registered it can be offered as a resale property on the open Buying & selling variables market, through the MLS system. Value 1: Agents preview Value 5: Year after registration Select real estate agents gain access to new Even though you can sell a new unit developments before they are made available immediately after registration, it is often to the public (called VIP agents preview). better These units are usually cheaper, and afford to wait a year. This gives time for other sellers buyers greater customization – floor plans, to unload their units, which translates to less directional view, storey, etc. Buying one of competition within the building. these units is a terrific way to both save money
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OCCUPANCY The occupancy date refers to the day you take physical possession of your condo unit. Typically, the unit will be complete, but common areas in the buildings – hallways, lobbies and communal areas – will remain under construction. These are the key things to know about occupancy.
3 Our team has permission to rent units
during occupancy. If you buy from us with the intention of renting, this permission carries to you. However, you must first obtain landlord insurance.If you choose to rent the unit to 4 a tenant, the builder will charge back the HST amount upon final registration. HST paid during occupancy is recoverable, so long as a one-year lease agreement is agreed to. Documents required to recover HST include:
1 You do not start paying your mortgage
a. during occupancy. Instead, you pay an interest only monthly fee on the balance owing to the builder, as well as property tax and b. condo fees. To illustrate this scenario, we’ve c. provided a theoretical formula below: Purchase price:
$500,000
Balance payment made: $100,000 Due to builder:
Copy of rental agreement Copy of interim statement of adjustments received by your lawyer from the developer upon occupancy
d.
Copy of final statement of adjustments received from your lawyer’s office at final registration
e.
A completed GST/HST rebate form
$400,000
The monthly payment required during the occupancy phase in this scenario would be:
Original agreement of purchase and sale entered into with the developer
Monthly interest ($400,000 x interest rate / 12) + condo fees + property tax = occupancy fees. Plugging in number to showcase how this may work, let’s use the following formula: Interest at 3.5%:
$1,166.66
Condo fees:
$350
Property tax:
$200
Total occupancy fees:
$1,716.66
2 Post-dated cheques must be provided
to the developer to cover the estimated period of occupancy.
Purchasing a Brand New Condo 2018 0 5 01 Purchasing a Brand New Condo
REGISTRATION OF YOUR UNIT Registering your unit means you have officially taken ownership. This step is necessary to determine certain expenses, such as the property tax. Things to keep in mind regarding this process include: 1 Your lawyer should be informed
2 You want to avoid incurring closing costs,
which will be transferred to whoever purchases the assignment.
3
You want to avoid taking out a mortgage for the unit.
When assigning an agreement of purchase and sale, be sure to account for the following:
approximately two weeks before the final registration date.
1 You must be sure that your Agreement of
An “Assignment” of an “Agreement of Purchase and Sale” refers to the sale of a unit you have purchased, but do not hold the title to. You may or may not have possession of the unit, and the building may not be registered. During the assignment process, you are essentially selling the “Agreement of Purchase and Sale” entered into with the builder to another person.
You will receive the original down payment, along with any profit earned from the difference between the original and resale prices.
Purchase and Sale does not restrict the sale of your unit prior to registration. Many developers charge a fee to consent to an 2 You will receive unused post-dated cheques that were provided for the period assignment. of occupancy. 2 If the new buyer does not fulfill the terms We highly recommend obtaining landlord and conditions of the contract, then you, 3 insurance for your unit if you plan to rent, as the original buyer, are still liable. and condo insurance if you don’t. 3 You must have a contract with the If your unit is not occupied by the owner assignee,which should be prepared by 4 (you), the HST will be added back on your a realtor or lawyer. A copy of the original final statement of adjustment along with other agreement should be attached to this contract, builder costs. along with condo declaration documents, acknowledgement of prior payments, the PDI Assignment booklet and any other relevant paperwork.
Assignments are quite common; however, you need to work with an experienced realtor and lawyer to navigate the process, whether you’re the buyer or seller. Why would you assign a unit?
1 You want to realize a profit on your investment as soon as possible.
4
Builders can refuse to allow assignments if the property has been advertised in the MLS, or any other public network. It is essential that you market the assignment properly, through a realtor with a personal network.
5
6 To safeguard the interest of the seller,
the buyer needs to make all payments (original downpayment + resale increase) to the assignor’s lawyer in trust. This amount should then be released to the assignor upon successful consent from the builder, or as provided for in the contract.
The Bahl and Yew Team. #1 Real Estate Team in Downtown Toronto 010 6Purchasing a Brand New Condo
HST ON THE PURCHASE PRICE As of July 2010, HST applies on all new construction sales. The HST charged on the purchase price consists of 5% federal tax and 8% provincial tax. In order to help homeowners deal with this additional cost, the Government introduced a rebate program to reimburse buyers for a portion of the new tax imposed.
Purchased to Live In When you purchase a new home or condo from a builder for yourself to live in or an immediate family member to live in, the Ontario HST rebate is assigned to the Builder on closing who in turn lowers the purchase price by the rebate amount. This means you do not have to pay HST on the purchase price! It is important to remember that the property must be occupied as a primary place of residence by the purchaser or their immediate family which means people related by blood, marriage, common-law partnership or adoption. Friends, business associates, uncles, aunts, nephews, nieces and cousins are all excluded from eligibility.
impacts the rebate. When it is a primary residence the purchaser obtains the rebate automatically from the Builder. When it is an investment property, the purchaser has to pay the HST rebate up front and then apply for the rebate from CRA.
About the New Housing Rebate The new housing rebate basically gives you back 75% of the Provincial portion (8%), up to a new home purchase price of $400,000 which equals to a maximum rebate of $24,000. ($400,000 x 0.08% x 0.75%).It is also possible to obtain a federal rebate of up to $6000. The rebate only applies to the first $400,000 which means the largest possible provincial rebate is $24,000 and the largest possible federal rebate is $6,000 even for a million dollar home. Article continues on the next page...
Purchased as an Investment to Rent Out to a Third Party When you purchase a new home or condo from a builder to rent out, the Ontario HST amount will be added to the purchase and must be paid in full on the final Closing date. Having said that; you can apply for a rebate directly from the Government as long as you have entered into a lease agreement with a minimum term of 1year. The difference between the home being a primary residence or an investment property Purchasing a Brand New Condo 2018 0 7 01 Purchasing a Brand New Condo
How long does it take to receive the HST Rebate? We recommend applying for the rebate immediately after the closing date. It can take up to two months to receive the funds from the government.
When is the Deadline? The HST Rebate must be filed within one year of a new home or condo closing.
What is required to apply for the HST Rebate?
•
Copy of the Agreement of Purchase and Sale entered into with the developer when originally purchased. (First 2 pages)
•
Copy of rental agreement (if we assisted securing your Tenants, we will have a copy of this)
•
Copy of interim statement of adjustments received by your Lawyer from the developer at the time of occupancy
•
Copy of final statement of adjustment received from your Lawyers office on final registration
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The Bahl and Yew Team #1in Real Estate Downtown Toronto
No one sells more condos than we do! We’re the #1 Real Estate Team in Downtown Toronto based on the number of condos sold in both C01& C08 districts for 2017 (MLS reported sales).We hope this instils the confidence that you’re dealing with a professional team. With the volume of sales our team produces, we have unique relationships & information that many agents are not privy to. We attribute our success to our valuable clients and our dedicated team of professionals.Feel free to reach out and see what sets up apart from the other 48,000 agents in our city.
RE/MAX Real Estate Solutions, Brokerage 14 Harbour St. Toronto, ON, M5J 2Y4 www.realestatecondos.ca Office: 647-259-8806 Direct: 416-837-7575 info@realestatesolution.ca
